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Ukraine Eyeing Chinese Gasification Tech

KIEV, Ukraine -- Ukraine indicated this week it will seek access to Chinese coal gasification technologies as a way to wean its power plants from Russian natural gas.

Mykola Azarov (L) and Li Jiping.

Ukrainian Prime Minister Mykola Azarov said Tuesday he discussed coal gasification as a means to generate power with Li Jiping, vice president of China Development Bank, which last month agreed to extend a $3.66 billion credit line to Kiev.

Azarov said the aim of the meeting was to push forward a plan for Ukraine to secure gasification technologies that could enable it move from using increasingly expensive imported Russian natural gas to fire its power plants.

The technology would allow Ukraine to tap its supplies of domestic coal, mix the material with water to produce a slurry and convert it into a synthetic gas.

The resulting "syngas" would be used to fire power plants.

"The issue of substitution of expensive imported gas with coal is a strategic issue for us," Azarov said.

"We are interested in China's coal gasification technologies in the hydrocarbon fuel."

The prime minister said further talks about the possible large-scale implementation of coal gasification technologies would take place in November when Ukrainian President Viktor Yanukovych is to make a state visit to Beijing.

Ukraine's agreement with China Development Bank calls for the building of three coal gasification plants in the country, with China expected to provide technological expertise for the conversion of Ukrainian power plants from gas to coal.

"You are implementing a program to replace the use of natural gas with Ukrainian coal. This program is at the strategic level," Li said. "Specialists of our countries have already reached an agreement on cooperation in the framework of this project and we are ready to provide you with a loan of $3.66 billion to support this program."

Kiev is motivated to invest in goal gasification by what it considers the unjustifiably high costs of Russian natural gas, currently set at $425 per 1,000 cubic meters.

It has been locked in a dispute with the state-owned Gazprom for two years over prices and has moved to reduce imports from 40 billion cubic meters in 2011 to 27 billion cubic meters this year.

The coal gasification deal also comes at a time when Ukraine has been stepping up economic cooperation with China as its relations with Europe and the United States soured due to what the Western countries view as Yanukovych's persecution of political rivals.

Beijing two years ago signed a memorandum of understanding with Kiev on coal cooperation, in which coal-dependent China is considering a $1.03 billion investment in the modernization of seven state-owned Ukrainian coal mines.

Last year it provided an $85 million to modernize the state-owned Melnikov mine.

Beijing and Kiev are also working on $3 billion in deals to support Ukrainian agriculture, Azarov noted.

Those investments would cover such areas as trade, fertilizer and cultivation and would include procuring pesticide, seeds and equipment from China in return for Ukrainian agricultural products, the Kiev Post reported.